Aker Carbon Capture ASA
OSE:ACC
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Aker Carbon Capture ASA
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Good afternoon, everyone, and welcome to the fourth quarter results for 2021 for Aker Carbon Capture. My name is David Phillips, Head of the U.K. and Investor Relations. I'm delighted to be joined by my colleagues, our CEO, Valborg Lundegaard, and our CFO, Egil Fagerland. Valborg will take you through the key achievements and key developments from 2021 and the fourth quarter and will also run through some points of our strategy that are very, very important for the year ahead. Egil will then run through key financials and also taking a forward-looking view and talking about some of the more important points for 2022 as well.And then we will run into your questions, and we'll give as much time as we can to run through all the questions you have. Just as a quick reminder, you can enter your questions online in the system at any time during your presentation. So please don't write them down, but pleased to just put them in the system and when we come to the Q&A at the end, we will run through those as fast as we can.Okay. Valborg, over to you.
David. Good afternoon, everyone. This is the agenda for our presentation today. Just to give you an outline of what we will be discussing following an extremely active and busy year. We will address the highlights of the quarter, our key achievement in 2021, trends in the carbon capture market, our operations and business development, the financial highlights of the quarter and the year, the way forward for our strategy. And finally, we'll move on to Q&A.But first, before we start with the highlights from Q4, we have a short introduction to our company. Aker Carbon Capture is a pure-play CC U.S. company with the strength of the wider Aker group behind it. We've seen many important benefits from this structure, including our customers will have our full attention. And for investors, this open up for investments in a pure-play company, not a conglomerate of segments.Our proprietary technology has been developed over 20 years and is validated to over 50,000 operating hours and certified for several applications. Aker Carbon Capture's technology is cost effective, robust and flexible, meaning it can be applied to existing plants or new builds. The process uses a nontoxic biodegradable mixture of water and an organic amine solvent to absorb the CO2 and as a market-leading HSE profile. When our customers come to us, they want to reduce their emissions and not introduce new emissions or hazardous chemicals. That is why our technologies, unique HSE characteristics are also a commercial differentiator.Now the highlights of the quarter. We secured our place in the feed contract for BP's Net Zero Teeside project in the U.K. as part of a consortium, including Aker Solutions, Siemens Energy and Doosan Babcock. This is the world's first commercial-scale carbon capture on a gas-to-power facility and marks a very important step forward for large-scale CCS in the U.K. and elsewhere. We started work on the Twence carbon capture project. This first-of-a-kind modular plant will enable the removal of CO2 from flue gases at Twence waste to energy facility in the Netherlands, with captured CO2 to be used by greenhouses to enhance plant growth.We moved ahead well with the Brevik CCS project, the first carbon capture project at a cement facility in the world. The project is progressing according to schedule with key milestones achieved and all major purchase orders placed. On-site activity will pick up in June this year, and the main installation work will take place in 2023. And we continue to position for the future market to a significant and growing number of project studies for customers. We showed strong financial progress through the year, finishing the quarter with a record level of quarterly revenue, up around 30% from the prior quarter. We also ended the year with a strong backlog position of NOK 1.9 billion, NOK 1.3 billion in net cash and with NOK 1.1 billion of equity.In the fourth quarter, we signed important MoUs with Viridor, one of U.K.'s leading recycling resources and waste management companies to look at the delivery of 5 modular Just Catch plants by 2030. Also in 2022, we signed strategically important MoUs that focus on the marine transport and storage part of the CO2 value chain for Hoegh, Altera and Dan-Unity.As we have stated before, the progression of viable transport and storage infrastructure is ultimately one of the most important drivers for project timing for CCS. And we believe that working more closely with key players in this area has the potential to accelerate the implementation of carbon capture overall. Firstly, we have signed a collaboration agreement with Dan-Unity CO2 in Denmark. Dan-Unity CO2 is the world's first carbon capture storage specific shipping entity established by Danish shipping companies Evergas and Navigator Gas.Our partnership with Dan-Unity aims to establish a flexible full value chain approach for CCS, further developing how our carbon capture facilities can work with their marine CO2 transport offering. And hence, build full value chain offerings that will help accelerate the adoption of carbon capture for industrial emitters. We aim to collaborate around market analysis, technical insight and commercial development, utilizing the considerable industry expertise from both parties.And secondly, we have entered into an MoU with Altera Infrastructure and Hoegh LNG. This partnership targets ways to optimize the full value chain and to fast track the deployment of carbon capture technology with an ambition to also support our carbon capture as a service offering. With both Hoegh, Altera and Dan-Unity, we will work closely with our partners to see how best to combine our technology with their gas processing and marine transport capabilities. And we are delighted to be working with companies with such deep expertise in offshore gas transport and infrastructure.In the fourth quarter, we signed an important MOU with Viridor in the U.K. Aker Carbon Capture was chosen by Viridor as a partner for accelerating decarbonization at waste-to-energy sites in the U.K. and delivery of 5 modular Just Catch plants by 2030. Viridor has an ambition to become the first net zero waste company by 2040 by bringing forward CCUS alongside plastics extraction and increasing recycling. The partnership with Aker Carbon Capture could accelerate Viridor's net zero plants by a decade to 2030.Developing the modular CCUS plants on the 5 waste to energy sites, combined with another 2 plant bespoke CCUS plants in the Viridor portfolio could deliver in total 1.5 million tons CO2 savings per year. These investments up to GBP 1 billion would also create around 1,000 construction jobs and up to 180 skilled green jobs in Scotland, Wales and England.Now I want to take some time to reflect on our numerous achievements over 2021. I see this as falling into 3 broad categories; customers, partners and corporate milestones. With customers, we have had an extremely busy year. Most important, we started work on the major Brevik CCS project in Norway, the world's first carbon capture deployment with cement manufacturer. And also the Twence CCU project in the Netherlands. And as part of a consortium, we were awarded the feed contract for BP's major Net Zero Teeside project in the U.K.We also set up a number of very interesting and promising customer partnerships across Norway, Denmark and the U.K. This included working on CCS with biomass heat and power in Denmark with Orsted and Microsoft looking at CCS in Norway with Lyse and Forus Energi and partnering with key customers like Carbonor, Elkem and Viridor to implement carbon capture across char production, smelting and waste to energy.We also set up a number of important complementary partnership across the value chain in 2021. We announced our collaboration around waste-to-energy plants with Hitachi Zosen Inova. We set up a global partnership with Siemens Energy focusing on carbon capture within power generation, we work with SINTEF around carbon capture technology. We develop our relationship with Denmark's Greensand storage project, and we partnered with Carbfix from Iceland to work on their CO2 mineralization technology, an exciting and potentially disruptive approach to CO2 storage.And we also achieved several important corporate milestones. We set up our entities in Denmark. And in the U.K., we raised NOK 840 million in a private placement. We moved to the Oslo Stock Exchange main list and set up at OTCQX trading in the U.S. And we were granted a number of important ISO certifications. All these steps represent a successful work of many teams and colleagues, and I am extremely grateful indeed for their focus and diligent work through the year.Now I want to spend a few minutes talking about some important targets and ambitions for Aker Carbon Capture, focusing here on our carbon footprint and ESG. The first target is to improve the carbon intensity of our products by 50% by 2030. This means we will further reduce the carbon emitted during the construction of our products relative to the carbon captured from current level of 0.2% for Just Catch and 1.6% for Big Catch. The second target is to reach a carbon negative position to carbon removal solutions by 2030. We know that carbon removal is needed in the world to reach net zero. And we believe that those who can should do more, and that is why we have set this target. It will require a dedicated effort across the company to reach these targets.Some areas I would like to highlight are continuously improve our technology in areas such as capture rate and energy efficiency. Collaboration, both with the supply chain with low carbon materials and strategic partners such as transport and storage to reduce the footprint of the full value chain. And lastly, purchase of guarantee of a region for renewable power for our plants in operation. This is an important approach to reduce scope 2 emissions. So we will continue our focus to realize carbon removals for our customers as well as maturing the carbon removal market.And as mentioned, we will also utilize carbon removal solutions to reach our own negative target. We are also pleased to share some early highlights. During COP26, the first movers coalition was launched. This is set to fast track the development of emerging green technologies. Aker ASA is a founding member. And together with some of the world's largest companies work to create predictability around demand for sustainable and low-carbon materials and products. And we have issued our commitment letter to the Science Based Target initiative, and we will collaborate with them to get our targets approved.Now let us have a look at recent market trends. Strong support for carbon capture markets continued during the fourth quarter. The recent CCUS report from the IEA highlights a more than doubling of the number of carbon capture facilities in operation and development when compared to 2020. These facilities represent a total capture capacity of around some 200 million tonnes of CO2 per year. And as a sign of the market growth to come, the number of facilities in the early stage project pipeline increased by more than 3x. This year has also seen continued strong momentum with the development of large CCS networks or industrial clusters. This bring economies of scale, such as shared transport and storage infrastructure and are very important for the development of CCS for both large and midsized emitters.According to the Global Carbon Capture and Storage Institute, as at mid-Q4 2021, there were 20 such clusters in advanced development at present, with 13 of these within Aker Carbon captures target market in Northern Europe. Also note, Wood Mackenzie's comment that over the last year, there were globally around 50 new hub or cluster projects in an early stage of development. Looking back at Europe. Recent months have seen continued supported policy news around these clusters, particularly in U.K., Denmark and Norway. In fact, policy support in general for industrial decarbonization continues to be very supportive across the board in Europe and also in North America.In addition, to the Fit for 55 targets for greenhouse gas reduction in Europe, we also know the growing dialogue from the European Commission around regulation for carbon removal certificates. Also, the last few months have seen more supportive moves by major companies to engage in voluntary carbon removal markets, helping to increase the price for carbon offsets. And funding for carbon capture for both countries and corporates continues to see good momentum with some $25 billion announced since the start of 2020.As a reminder of the scale of carbon capture needed to move forward towards net zero we highlight key numbers from the IEA Net Zero 2050 road map. This is the need for some 1.6 million to 1.7 million tonnes of CO2 capture by 2030 and 6.7 billion tonnes CO2 by 2050. Put another way, with this scale ahead, the CCS industry could, in the medium term grow to reach a similar size to that of natural gas today. But despite these numbers, we continue to believe the market needs to accelerate to meet the ambitious net zero targets from countries and customers. This is why at the heart of Aker Carbon Capture, we place such importance on technical as well as commercial innovation.Now we move on to look into more detail at our business strategy. Since mid-2020, Aker Carbon Capture has focused on the European market with Scandinavia, Benelux and U.K. leading the way. Here, the interest from customers continues to be the highest and the regulatory environment to support adoption of CCUS continues to be the most mature. We also note the increased policy support and early-stage corporate activity around CCS markets in North America. This is a major market for industrial emission. As an example, the IEA CCUS industrial CO2 emissions at 2.3 billion tonnes per year with 1.8 billion tonnes from power and heat generation. Importantly, the majority of this footprint is in scope of our proprietary carbon capture technology, and we continue to see this major region as a logical next step for our expansion.We continue to prioritize 4 market segments where our technology has been tested and certified. Cement, where we now are delivering the first facility in the world to capture CO2 at Brevik CCS. Bio and waste for energy where we are delivering our modular Just Catch facility for Twence. Gas to power, where we are delivering a feed for BP's Net Zero Teeside and blue hydrogen, where we have validated our carbon capture technology for SMR hydrogen production for Preem. And we are also seeing good engagement with a number of additional sectors where our technology is well suited to capture CO2 such as smelting, pulp and paper and engineered carbon or char.Now for a moment, I want to talk about the potential market for CCS in Europe. There are a number of important factors to access with this market. How many meters there are, what size of emissions they represent, what type of flue gases these are to make sure the technology works, where the facilities are in terms of transport and storage and the timing of storage project maturity. We have focused here on the part that is closest to us, the industrial emissions footprint. Across all Europe, there are around 2,400 industrial facilities, emitting 1.6 billion tonnes of CO2 per year. Importantly, the great majority of these are a good fit with our proprietary carbon capture technology.If we only focus on our key industry segments, Blue Hydrogen, cement, gas to power and waste to energy, we see around 70% of the European total as in scope, which is equivalent to around 1 billion tonnes of CO2 per year. And making the important selection of those within a relatively short distance of a harbor or a similar facility for marine transport and storage takes this down to around 250 million tonnes of CO2 per year. This points towards a significant market opportunity ahead but also highlights the importance of a credible route for transport and storage of the CO2.The issue -- this issue is key for our business development, where we select prospects with good options for transport and storage and for our corporate strategy, where we are helping to accelerate the CCS industry by developing partnerships with transport and storage players in the value chain. We highlighted our partnership with Carbfix on the storage side and our recently announced MoUs with Hoegh, Altera and Dan-Unity with marine transport.I'd also note the growing interest we see in carbon capture and utilization, CCU. And in fact, we are working on a real CCU project right now with Twence. Currently, the potential market for CCS is projected to be much larger than for CCU. But technology development is moving at pace and could accelerate this market. We are, therefore, watching the CCUS market very closely.When we established in 2020, we set out an ambitious target to secure contracts covering 10 million tonnes of CO2 by 2025, our 10 in 2025 target. Now 18 months into our delivery of this plan, we want to give you some indication of our progress. We visualize this across 4 categories; secured EPC contracts, secured feed contracts, tenders and studies and prospects. There is a range of probability of the work becoming a firm contract with the highest being our already secured contract and the lowest with our longer-term prospects. Here, the 0.5 million tonnes represents our already secured EPC work with Norcem and Twence. Then the feed category, 4 million tonnes, which reflects the Net Zero Teeside project as well as non-disclosed work.Then we have the tenders we are currently involved in and studies we do for our customers. This work represents a very active part of our business development and is equivalent to around 3 million tonnes per year. And finally, we have our prospects. These are the potential opportunities on our radar screen, where we are in early discussion. These are, by definition, less certain to convert into firm contracts, but as you can see, make up a quite large market opportunity in the medium term.Now we turn to our key industry segments, starting with the cement industry. We are proud to be selected by Norcem HeidelbergCement for the Brevik CCS EPC delivery; the world's first carbon capture project at the cement facility. The plant will have superior heat integration with the existing cement plant and will capture 400,000 tonnes of CO2 per year. The EPC contract commenced in January 2021. Key milestones have been achieved according to schedule and all major purchase orders placed. On-site activity will pick up in June this year, and the main installation work will take place in 2023.The Brevik CCS project is part of Longship, the greatest climate project in Norwegian industry ever. This is a full CCS value chain development, including Brevik CCS as well as the transportation and storage project Northern Lights. Longship will be in operation in 2024.As highlighted recently in the media, Norcem has reported an overall cost increase for Brevik CCS to the Norwegian government. Aker Carbon Capture's contract value represent approximately 50% of Norcem's overall cost and 10% of the Longship development. It is still early days in our project. However, Aker Carbon Capture has met all milestones and placed all major purchase orders. The increase in Norcem project cost is not related to the CCS technology. The technology has been successfully tested in Brevik over several years with our mobile test unit. The cement industry represents 6% to 7% of the global CO2 emissions, and CCS is a key solution to decarbonize this hard-to-abate segment. And we are also in dialogue with additional customers in this segment across Europe, like Titan Cement in Greece.In the third quarter, EU approved the Dutch government's funding of the Twence project. And after the customer's final investment decision, we started the EPC project in the fourth quarter last year. The project will enable removal of CO2 from flue gasses at Twence waste to energy facility located at Hengelo in the Netherlands. And the captured CO2 will be used in greenhouses to boost plant growth. This is a Just Catch modular plant with a capacity of 100,000 tonnes of CO2 per year. In the U.K., we announced an MoU with Viridor to focus on accelerating decarbonization at its waste to energy side and the delivery of 5 modular Just Catch plant within 2030.Also in the U.K., Aker Carbon Capture is studying implementation of a large-scale carbon capture plant for Redcar Energy Centre, a waste to energy plant that is part of the vision for Net Zero Teeside. Aker Carbon Capture, Orsted and Microsoft are exploring ways to support the development of carbon removals at Orsted's biomass-fired heat and power plants in Denmark. Aker Carbon Capture and BIR are exploring carbon chapter at BIR waste to energy plant in Bergen or Norway's West Coast close to the Northern Lights terminal. And Aker Carbon Capture has signed an MoU with Lyse and Forus Energi to explore development of a full-scale CCS facility in the Stavanger/Sandnes region in Southwestern Norway.Our third prioritized market segment is carbon capture for large-scale gas to power plants. In the fourth quarter, we secured the feed study for the Net Zero Teeside project in the U.K., where Aker Carbon Capture is a technology partner to a consortium of Aker Solutions, Siemens Energy and Doosan Babcock. The facility at Net Zero Teeside, a gas powered station, will have a capacity of about 2 million tonnes of CO2. This will be the world's first commercial scale gas-fired power station with carbon capture. The CO2 transportation and infrastructure will be developed by the Northern Endurance partnership to serve the East Coast cluster, confirmed as Track 1 in the U.K. industrial decarbonization strategy.Leading up to COP26, the U.K. government announced that its ambition for CCS has been increased from 10% to between 20 million and 30 million tonnes CO2 per annum by 2030. The announcement also included the selection of Track One clusters, high net and East Coast, which will begin decarbonization U.K. industry from 2026. We now see the market response to this. One major example is that SSE and Equinor have submitted proposals to the U.K. government Phase II cluster sequencing for CCUS deployment for its plant Keadby 3 carbon capture power station and Peterhead Carbon Capture Power Station.We need both green and blue hydrogen to fight climate change. Aker Carbon Capture focus is the blue hydrogen market, hydrogen from natural gas with carbon capture, which we would note is also EU taxonomy aligned as a carbon efficient process. We have strong technology partnership in this space with Haldor Topsoe and SINTEF, and we also have some exciting technology developments underway. We are highlighting here a new innovative technology, a cryogenic pre-combustion carbon capture technology, not aiming based which will complement our existing proprietary aiming based technology for SMR steam-methane reforming hydrogen plants.The technology is the result of our collaboration with SINTEF and with support from the Norwegian Council, Research Council of Norway and targets carbon capture for use on large-scale ATR, autothermal reforming hydrogen plants that produce a high level of CO2. Our results indicate over 95% CO2 capture performance. The hydrogen market is significant. The IEA estimates that 33% and 38% of global hydrogen market to be blue in 2030 and 2050, respectively.In the U.S., Blue hydrogen accounts for over 20% of the CCS development, and EU sees EUR 11 billion need to retrofit half of the existing plants by 2030. At Elkem blue hydrogen project in the Northwestern Norway, this project will utilize the natural gas from the large offshore Ormen Lange field to produce blue hydrogen with CCS. The Elkem partners, Shell, Cape Omega and our sister company, Aker Clean Hydrogen, have now decided to further mature this opportunity following a successful pre-visibility study.The environmental impact of blue hydrogen has been the subject of much debate in recent months. And in this context, I think it's worth mentioning that the total emissions from the Aker project will fall well within the boundaries set by the EU taxonomy and utilizing the blue hydrogen to replace fossil fuel would have a significant positive impact on the environment.Now before we move to discuss our business model developments, we want to spend a moment to highlight our technology agenda. Investing in technology development is a key part of sustaining and growing Aker Carbon Capture's competitive advantage and differentiation. As discussed before, we've taken important steps to develop and mature our innovative blue hydrogen technology for pre-combustion capture.Other highlights from our technology development program include success in verifying our carbon capture technology for handling flue gases with low level of CO2 where we have achieved a capture rate of over 95%. This has been a key driver for our recent award within the gas to power segment. We are moving forward with our plans to add a second mobile test unit, MTU, reflecting high amount demand from our customers for on-site testing of our technology.And we continue to grow our already strong digital position with further development and deployment across the value chain, including fully digitalized engineering and operations and digital twins as visualized in the geospatial view on the left. The digital agenda is truly exciting, and we continue to see significant competitive advantage from developing this digital architecture for carbon capture value chain, alongside the leading external companies like Microsoft and those within the Aker ecosystem.Now our CFO, Egil Fagerland, will take us through business model development and financials.
Thank you, Valborg. So we have essentially 2 main product offerings; Big Catch, which can handle 400,000 tonnes of CO2 per year or more, and the modular Just Catch, which targets 40,000 to 100,000 tonnes per year. We can deliver either of these on an EPC project basis. And for Big Catch, we can also offer a license model with key equipment.Our modular Just Catch offering is at the heart of our carbon capture as a service model. The EUA or the EU ETS has remained strong in recent months, and we now stand at almost EUR 100 per ton. This is influenced somewhat by the move seen in commodity demand and prices feeding power generation such as coal and natural gas. And just recently, for the first time, the EUA forward curve has moved into triple digits for prices around the middle of this decade.In comparison, at this time last year, the EUA forward curve for 2025 was around EUR 40 per tonnes. Analysts targets for carbon by 2030 continue to be in the range of EUR 80 to EUR 150 per tonnes, supported by the IEA sustainable development scenario, which requires carbon pricing of minimum EUR 115 per tonnes to achieve emission reduction targets. These prices compare with our range for levelized cost of carbon capture for the case Just Catch based carbon capture as a service offering of between EUR 70 and EUR 150 per tonnes, which I will cover in more detail shortly.Reducing cost is vital for our ambition to improve project economics and accelerate uptake of carbon capture. We are continuously working on reducing costs for our main products. Just Catch our standard plant and Big Catch our large-scale made-to-order facility. And we have set a target of up to 50% CapEx reduction by the mid of this decade. The cost can and must be further reduced and even more so now given the inflation headwinds in some parts of the market. We have already achieved a significant cost reduction for our Just Catch offering. We have already been able to reduce this cost by 90% since 2012.During 2021, we made strong progress. We set up long-term strategies for working with our supply chain. We've seen the significant improvement from our plans to standardize and modularize. And as our projects progress, we've also started to see benefits from learning by doing and the potential from economies of scale. For our Big Catch offering, the key target for our cost reduction ambition, we believe these benefits are at least offsetting the cost inflation that we are seeing in the supply chain. Cost reduction is one important way to accelerate the industry. Business model innovation is another.It was clear to us in 2021 and still is now that interest from companies, both small and large that want to reduce our industrial emissions has skyrocketed. Many of these companies that want to reduce their emissions through CCS have been held back by the complexity and commitment required to act. To help this challenge, in 2021, Aker Carbon Capture launched its carbon capture as a service offering, an integrated offering that covers everything a customer needs to reduce emissions by CCS. Its carbon capture made easy. Aker Carbon Capture and its partners will then handle the full value chain from point of emission to permanent storage and the customer will simply pay per tonnes CO2 captured.In this presentation, we've adjusted our estimated levelized cost for the full value chain service offering to range between EUR 70 and EUR 150 per tonnes. In the third quarter, we presented a range of between EUR 75 and EUR 145 per tonnes. For comparison, the EUA is now almost EUR 100 per tonnes and most recent analyst targets for carbon ranges between EUR 80 and EUR 150 per tonnes. The CapEx for the Just Catch plant, including liquefaction and temporary storage and financing has increased somewhat due to the recent general market cost inflations, seen for raw materials, products and services. We now estimate this range to be between EUR 30 and EUR 45 per tonnes of CO2. This is up from EUR 20 to EUR 40 per tonnes before.The cost range reflects efficiency gains through implementation of serial production, which is partly offsetting the cost inflation seen in the market. The OpEx, including solvent supply, energy, digital operations center, labor and maintenance has been lower than widened to a range of EUR 10 to EUR 45 per tonne. Previously, this was EUR 25 to EUR 45 per tonne. And over the last quarter, we've successfully identified a large range of prospects with excess heat available. This significantly reduces energy costs in operations.In addition, further potential for plant automation has been identified. The highest range we still see for transportation and storage with EUR 30 to EUR 60 per tonne, which is an unchanged range from before. This cost will vary mainly due to the distance from source to available storage. I will now take you through the key financial highlights of the third quarter before we look at the strategy with Valborg and then move on to Q&A.Bear in mind that all numbers I mentioned are in Norwegian krone, and let's start with the income statement. Overall revenue for the fourth quarter was $130 million, which is 28% up compared with the previous quarter. This reflected an increased activity on Brevik CCS, which is continuing to meet all planned milestones. In the fourth quarter, we also started recognizing revenue on the Twence Just Catch EPC project. Our mobile test unit was operating in Poland, and we saw continued increased activity level for pre- feed and feasibility studies.Our reported fourth quarter EBITDA was negative NOK 66 million, which was a decrease from NOK 11 million of NOK 11 million from the previous quarter. Profit has not yet been recognized on Brevik CCS EPC and Twence Just Catch EPC. We will start recognizing profit on these projects when they reach a high level of certainty in cost estimates. The mobile test unit campaign in Poland, pre- feed's and feasibility studies contributed favorably in the quarter. The overall negative EBITDA was mainly driven by an increased activity and investments into our research and development projects, digitalization projects, tenders, business development efforts and international growth in both U.K. and Denmark.Now to the balance sheet. Our fourth quarter net current operating assets ended at negative NOK 260 million on the back of positive cash position on our key projects. Our overall operating assets and liabilities represented a net represented by net capital employed of negative NOK 245 million, again signals that our operating activities are currently being funded by working capital and other liabilities. We have a very healthy cash flow position at NOK 1.3 billion, which could cover all liabilities 2.5x. And finally, our equity has been strengthened by NOK 624 million in 2021, and we ended the year at NOK 1.1 billion equity. This increase was mainly driven by a capital raise of NOK 840 million in the third quarter, which was partly offset by negative net profit through the year.And now to our cash flows for the fourth quarter. We started the fourth quarter with NOK 1.398 billion in cash. Through the third quarter, we saw an overall cash outflow of NOK 77 million. The major drivers were loss before tax, change in net current operating assets and CapEx. The loss before tax represented NOK 65 million. The net current operating assets ended fourth quarter at negative NOK 260 million, which represented a cash outflow of NOK 2 million. And finally, our CapEx was mainly related to the building of a new mobile test unit and product development and standardization represented by overall cash outflow of NOK 10 million.In total, our overall cash and cash equivalents ended the fourth quarter at NOK 1.321 billion. And finally, we now will outline some key figures concerning our financial outlook. Firstly, our backlog scheduling. We ended 2021 around NOK 1.9 billion of backlog. And by year of execution, we see this roughly at NOK 700 million this year, NOK 1 billion next year and around NOK 200 million in 2024. Secondly, our operating expenses. As a fast-growing company, we've seen our costs expand quarter-on-quarter through 2021, as we have grown our business to match the market opportunity.For the fourth quarter last year, we saw our salary and other personnel costs and other operating expenses together total around NOK 77 million. Excluding costs associated with projects, we expect to see operating expenses through 2022 around similar levels, but with significant flexibility. Thirdly, to our net cash balance. We benefited in 2021 from a favorable cash position ended the year at NOK 1.3 billion. This was helped by a capital raise and favorable movements in net current operating assets as we progressed our projects. Through 2022, we expect to see some of this cash position used up as we progress projects further. And based on project movements alone, we would expect to end the year with a net cash balance slightly below NOK 1 billion. Also, again, based on project-related cash flows alone, we would expect to see this trend reverse somewhat in 2023. Please note that these comments do not include any assumptions for cash spend on M&A or additional investment opportunities that might arise during the year.Thank you. And I now hand back to Valborg for some closing comments before we move on to Q&A.
So now let me share with you the way forward. A year and a half after the company was established, we're in operation, delivering Brevik CCS, the world's first carbon capture plant at a cement facility. Delivering Twence CCU in the Netherlands and working on BP's Net Zero Teeside feed, in the U.K. We have set ambitious targets and a clear direction to position for the huge market ahead of us. Initially, we have prioritized the European market and 4 market segments; cement, bio and waste-to-energy, gas to power and blue hydrogen. These remain in focus. And we also see opportunities emerging in North America and in a number of other industry segments where our technology is effective.We cannot meet our ambitions alone. Therefore, we have entered into collaboration agreements with a number of complementary partners to accelerate the adoption of carbon capture. And we see this aspect of our development, remaining very active in the years to come in line with our growth strategy. We may pursue new strategic partnerships to accelerate our business into new markets and industries. Such strategic partnerships may include an issuance of new shares to provide any such potential partner with a minority equity share in the company.To turn CCS economics positive, the cost must come down further. We've set a target of up to 50% CapEx reduction within the middle of the decade. There is not one quick fix. We must challenge the cost in many ways. We will continue to work with EPC and license models, but we must also bring the full value chain together; carbon capture as a service, carbon capture made easy. Our customers will simply pay per tonnes CO2 captured. We believe that this will accelerate the market as well as accelerate cost reduction. With strong signals for CCS market growth and doing the right thing now, our ambition remains to secure contracts to capture 10 million tonne per annum of CO2 by 2025.Thank you. And now we move to the Q&A session of our presentation.
Okay. Thank you, Valborg and thank you, Egil. So Q&A. As we said before, you can put your questions in here any time. So if some just come to mind right now, please do add them in the system, and we will try and get through as many as we can. I see it's a pretty full list already. I would say the order of answering questions is as much driven by IT as anything else. So if your amazing question doesn't get picked up when you think, don't stress, we will get there eventually.So let's start off. A number of questions here. So of your revenue since first reporting back in 2020, could you indicate how much in percent is linked to Norcem and when do you expect to recognize profit on this contract as well as for Twence?
Yes. So I don't want to specifically say a percentage for Brevik. As you know, it's a big contract. It's the majority of our revenue. And in terms of the profit recognition, we will recognize profit when the estimates for costs are highly probable. And that is typically once all purchase orders are placed, and we see progress on fabrication scope.
Okay. And a follow-up on Twence. Are you able to give any indication of contract value?
I think we will not comment on the contract values of this right now as we have a limited amount of contracts in our backlog.
Okay. Thank you. And the last one from Oystein. Talking about Norcem. I know you talked a little bit about this in the presentation already. But maybe for Valborg, what can we say about how the progression and any more color around the cost overrun story with Norcem?
First, it's still early days. We are in the phase of digital engineering, but we have placed all major purchase orders and have not started any fabrication work in Brevik. If you look at the overall progress for Norcem, they have placed a number of contracts, where represents approximately 50% of the value. So going first is, of course, civil. And if you look at Norcem's feedback to the market regarding cost increase, it's related to that civil work. It's related to some decommissioning of existing facility in Brevik and so on. What we experienced from our side is that we've seen a slight COVID effect on our future scope.
Okay. Moving on next question. Congratulations on being part of the 2 consortiums, delivering feed from Net Zero Teeside. When can we expect updates on the selection process? And when will the final winner be announced?
Well, I think here, we have to refer to our main customer, BP. And there is a process going on now and they have just submitted their funding applications. So we are absolutely working and doing our best to make sure that BP will be successful in that race.
James Carmichael has filled the screen with the questions, and hopefully, we'll answer some more of them already. First up, maybe one for Egil. Looking at the CapEx side of the levelized cost of carbon capture analysis. What has caused the increased CapEx? And secondly, how are we looking to achieve the 50% cost reduction in low end OpEx in the current energy price environment?
Yes. So the majority of the change that you see on the CapEx piece of the Just Catch for carbon capture as a service relates to the recent cost inflation that we've seen in the market. That could also change in the future, of course. But we'd like to update you on the current status that we are seeing and estimating and that's the driver of that increase. What you should also notice that the top range hasn't changed all that much. And we see that as we will be able to sell more of these facilities, producing them in serial and mass production will be an important factor to offset any of these impacts.
The next question looks at, or talks about, the capture phase emission intensity. I might suggest that, James, that you and I have a chat with our head of sustainability on that one because it's a very long answer, but we do have data and also you will see increased disclosure on this when we have our annual report out, which I believe is mid to late March, March 18, I think.And next question, back to U.K., the U.K. cluster projects. How should we think about the time lines for the U.K. cluster projects? And will the projects we flagged in terms of our feed part of the scope, will they involve competitions, or have we been preselected for some work there?
Well, the contracting strategy is, of course, up to each customer how to move forward with this. BP has after having a wide range of competitors selected too, to move forward with the feed. So we are in a competition here. When it comes to the way forward, of course, we already answered that when it comes to funding from the British government. However, like for all our projects, it's to ensure transportation and storage, which really is the ultimate date for start-up.
Okay. And last one from James. I know, Egil, you talked a little bit about the outlook for the operating expenses through this year already. But anything else we can say around the direction of salary personnel, other costs in 2022 as our business continues to scale? And behind that, CapEx, how is that going to move in 2022?
Yes. So when it comes to that outlook that we shared on our other operating expenses and personnel costs. I'd say it stays around the current levels for the current markets we are in. It does not include any M&A or entry into new markets and the like. Also, I'd like to highlight that we have a high level of flexibility in this cost base for the other operating expenses, we have about 70% flexible cost in that bucket alone.And for the CapEx question, you saw the quarter with about NOK 10 million of CapEx through next year with the building of a new MTU, you should see that increase slightly. But also there, we have flexibility moving forward. But of course, investing in technology is a priority for us.
Okay. Thank you. With carbon prices, I'll summarize the question, it's quite a long one, but it's a very good one. With carbon prices nearing EUR 100 a tonne in Europe. What are the factors holding back project decisions? When can we expect to see the market pick up?
Well, I think I said it at least twice already. We need to see the storage solutions coming in operation here. And Northern Lights will be the first in 2024. We have Porthos and then there are a number of storage projects coming on-stream second half of this decade. We see Twence now. We are already delivering that. That's a CCU project, and they don't need the transportation and storage part of the value chain. And that's why we can move forward. And I also highlighted in the presentation that we are looking at the CCU market in order to accelerate early because there could be options, for instance, of Power 2x that could come earlier than when transportation and storage is available.
Okay. And one extra one here. Talking about carbon capture as a service, have you made any progress with potential infrastructure funding partners, Egil?
So what we've done on the funding side or financing side of carbon capture as a service is that we've worked with several infrastructure, potentially, partners to either directly work together with us in Aker Carbon Capture or through the green yield setup in Aker Horizons. So we've made progress, and that's moving forward.
Okay. Next one from Anders. Moving on to -- or move back to Norcem actually. We have answered this topic before, but it's a very important one. So I think it's worth reiterating a few points. What can we say about the Brevik project in terms of who might carry the increased costs and how this might affect our margins?
Well, okay. This is, of course, something I really would refer to our customer, Norcem. There is a dialogue now between North and the Norwegian government, and they are directly into negotiations now. So I cannot comment on that.
Fine. Understood. Net Zero Teeside, the feed work, and maybe I could ask this question in a generic way rather than tying it to a particular project. Feed work, is this paid work that generates margin, or is it based on cost recovery? Or is it just an investment for the future?
We really see feed work as an interesting positioning, but also a paid work for us. These are quite major scope. So when you come into such details detailing out the designed in such a way, like you do in a feed, I would really say that this is the main route.
Absolutely. Okay. So a very short question set, I suspect I can get the answers to them already, actually. Firstly, Egil, how much is an MTU cost?
Yes. I think we're not going to go in detail on that. But you will see through next year on our CapEx line, of course. But this is a very important investment for us as we see demand for testing our technology increasing quite a lot.
Maybe just to highlight right now, our mobile test unit is in Poland, testing on char facility there, which should be ready for carbons plants outside the Northern Light terminal where we are in dialogue on carbon capture as a service. We also have a contract in place for our next campaign, which is with Elkem Rana, Norway, Northern Norway, and that's for the smelter industry. So we will really qualify our technology for a new segment with our mobile test unit. It has been very valuable for us, both in covering new segments, but also ensuring that we can have higher capture rates and guarantee that.
Absolutely. I think the MTU is by far the most popular member of the sales team. And just out of interest to you, how long does it take to build it?
Yes. This is -- I won't go into details on that. But here, we can talk about months and not years.
Yes, absolutely great went phrase it. Egil, I think I can guess the answer this one, but just to ask it, what year will ACC be profitable?
I think we will not give guiding on that. And in particular, the outlook that we shared with you is for the current project portfolio and the current markets that we are in. But of course, we're a growing company in a huge potential industry here and giving a specific year or date for that is not something that we will do right now.
Fine. Okay. Moving on to the Niels Vegter. Are there plans to expand the activity further in Europe, for instance, Germany?
Well, we're following the Northern European market very closely. We have seen Norway, Scandinavia, in general, Benelux and U.K. are leading the way, but we now see also rest of Europe coming. And Germany is interesting and maybe in particular, related to Power 2x.
Yes, absolutely. Okay. Moving on to Fabrice. Looking at our comments around orders or other backlog in 2022 and so on. Should we see the backlog in 2022 as a good guide for your sales this year. And I mean, thinking particularly in terms of which month we're in, where CO2 prices are, should we expect to see order intake accelerate as a result?
Yes. I think you've seen our updated slide now on our sales funnel, sharing our secured feed work and also our studies that are ongoing and the prospect funds. So there's certainly a lot of activity ongoing in the market. And earlier in the questioning line, it was highlighted when will orders come' We have already seen, of course, Brevik and Twence and BP Net Zero Teeside feed. So I would say activity is picking up, but there's no guarantee that big projects will be sanctioned in 2022, in particular. But there are moving activities now, I would say.
And also refer to the high number of dialogue and MoUs we have entered into with key customers who are eager to move forward. Maybe highlight, in particular, for instance, the Danish market, where funding has now been granted in total DKK 16 billion and now in first Round 8. And this position a number of our customers in Denmark looking for how they can move forward with CCS or CCU.
Absolutely. Thank you, Valborg. We're on the hour market, but we have still have a few questions to go, so I reckon we give it another 5, 10 minutes to see what we can work through.So Turner was asking a question about CCU. I suspect it might be a little bit early for us to have a firm numerical answer for this. But when we look at CCU, what are our views in terms of how project economics might compare versus what we've talked about for CCS in a carbon capture and storage case.
I can give a generic comment to that. I think the important thing with the CCU if you compare it with CCS is that transportation and storage element, which we have set to EUR 30 to EUR 60 per tonne for the realistic projects that we see. It depends with CCU. It depends what type of utilization case you are looking at. But it's, of course, easier to justify that element if the cost is lower than the transportation and storage and utilization case is sound. So I hope that was an indication at least to what we're looking at.
And it's also a question about what's the value of the end product. What sort of premium will customers be willing to pay for green solutions. And I think this is something that we really try to promote to the First Mover Coalition where Aker has entered into really to promote the market to use green solutions in general. So this is not only driving the CCU market, but also our overall ESG agenda.
Absolutely. Thank you. And just going back to the carbon capture as a service cost range, the levelized cost famous diagram. You talked a little bit about CapEx, but the OpEx side, and maybe for Egil, a little bit more color in terms of what's driven that number at the bottom end, particularly what's driven that bottom OpEx down?
Yes. So, when we presented this in the third quarter, we had already included quite high energy prices for a full electric facility. But our facility also works when you have excess heat or excess available. And we've identified quite a few valid prospects where that is a potential route. And that will definitively drive down the cost for the operational phase as we can reuse available heat and steam on the existing industrial facility. So that's a major part of that downward move that you've seen in the cost range for OpEx.
Absolutely. And a very quick one from Rachel. Can you just a quick reminder, carbon capture a service as part of the 10 in '25. Do we still have the same view?
Yes. So we've shared that view. We're looking at 10% to 20% of that 10 in '25 target. Okay.
And a multiple question from James Winchester here. So inflation, we talked about when you think about how the whole supply chain is developing. What are we seeing in terms of costs and time lines, maybe shortages, availability across the key components in the supply chain?
I think we haven't yet seen a shortage of available capacity. But of course, we've seen certain prices go up and that we have reflected in our carbon capture as a service cost overview. So we are trying to be transparent on showing you how that is moving. And in there, we've included the latest prices, which could, of course, move down again as well.
Absolutely. In our new 10x25 progress chart, can we talk a little bit about the time lines we're sort of implying in the studies and tenders and prospects? What sort of visibility timelines are those could those coming on?
Well, we still have our 10 in 25 as a target. And we feel that by sharing this picture with you, you get more insight into how we work, how we work long-term with our customers who are in a very early phase, and we're explaining our offering and products. Those who are more committed and want us to look at solutions for their plant in particular, do they have excess heat available as one example and so on and what would the actual cost be. And then we are directly into negotiations when we come to tender and so on.Again, I like to go back to the bigger picture, the whole value chain, whether it's CCU or CCS, it needs to be in place, and that is really the key driver. We are ready. We are delivering Just Catch right now to Twence. And we have the technology, we have the products in place. So we need the full value chain.
Absolutely. And just turning to look at the U.S., or North America, can you say anything about what business model might be getting the most traction?
Well, for North America, I think it all depends really on the strategy we finally decide how to enter that market. We need to do it the right way. We will need a partner in order to do so. We've been very clear about that. A partnership is a major part of our core strategy, and you know the number of partnerships that we've entered into. So entering North America will require such a partner. And that partner could have ability to complement our offering in various ways, whether it's delivering of the plant or whether it's the full value chain. So I would say that the models in U.S. would also very much depend on that overall strategy and the partnership selection.
Okay. Thank you. Now we have a financial one from Thomas Nest. I think that's going straight in to Egil's list. Gross margins, Q4 down substantially versus Q3. Anything particular to note in that?
No, as I said in the presentation, we're continuing to invest in the business. We've strengthened our team, both in Norway, Denmark and U.K., and I think that's the main take away that we are continuing to build the business and invest in our technologies.
Fine. Okay. And just for the record, although I can tell you what the answer will be, anything we can say about the long-term gross margins on Norcem?
No.
I knew it would be that one. Okay, and moving on, not very many to go now. Kate O'Sullivan, looking at capture as a service, we talked about the increase in CapEx, and I know we've talked a little bit about that. We talked also about OpEx. But I guess the forward-looking piece, do we see looking through 2022 when we have this discussion in 6 months' time, for instance, will we see another tick up in the CapEx side? What can we say about that?
I would say, again, it depends. Of course, we are also subject to the supply chain that we are in and the purchases that we need to do. So if we see a significant pressure in that, yes, that could happen. But we also see good progress in our standardization efforts. And we see that also offsetting. And now that we are progressing on real projects, purchasing real components, we are also establishing real partnerships with vendors, which is very good for us and also helpful in maintaining a fairly stable cost view.
Okay. This one, again, I can guess the answer, but just for the record. And think about the future scope at Brevik, is there any drawback where the scope could decrease? I mean I know the stories have talked about scopes increasing. Is there anything that could bring it the other way?
No, I don't see that. We are very committed to make this project a success. It's extremely important for us. We'll be the first in the world to capture CO2 owner cement plant, but it's also really the large big project that started our journey as a stand alone pure play company. So we want to demonstrate to the market, to our customers, that this is a success. And we will stay there all the way.
Thank you, absolutely. Last question from Lars. Egil, this is very much for you I think. Cash flow and the cash position, how should we understand the comment around cash flow in 2023? Do you mean it's a positive number or is it just less negative than in 2022?
I think you should understand that as an increase in our cash balance in 2023 related to projects. So as we've explained before, our main projects are cash positive throughout covering our expenses as we go. And the nature of that means we're getting paid before we pay our sub vendors. And that is partly the reason why you see a working capital position right now that is favorable, which will have an outflow through 2022. But of course, throughout the projects overall, we will have a positive cash flow and that you will see the effect of in 2023.
Absolutely, very clear. Okay. That is the questions, all done. Thank you, everyone, for your attention and interesting questions. It's very extremely helpful for us to go through these deep discussions with you. And that's the end of our formal discussions for today. Please do keep in contact with us. If you have any follow-up questions, you know where we all are. My details are on the website, so you can chase me directly. And we look forward to talking to you at the very latest in April with our Q1 results. Thank you.
Thank you.
Thank you.